How the FCC screwed up its chance to make ISP blocking illegal

The commission can still put ISPs under its thumb, but it may not want to.

Today's court ruling invalidating the anti-blocking and anti-discrimination rules in the Federal Communication Commission's Open Internet Order was not a surprise to observers who were aware of one inconvenient fact—the FCC really screwed this one up.

The commission's intent was noble. Its order laid down network neutrality rules making it illegal for Internet service providers to block services or charge content providers for access to end users. For example, the order would prevent Verizon from giving Netflix a faster path to consumers in exchange for payment. It would also prevent Verizon, or similar companies, from blocking rival telephone or video services that compete against its own offerings.

Verizon challenged the order and got a big victory today in a ruling (PDF) by the US Court of Appeals for the District of Columbia Circuit.

The FCC's problem was that several years before its 2010 Open Internet Order, it classified ISPs as information services instead of telecommunications services, exempting them from common carrier rules. As Ars wrote in 2010, the common carriage part of US communications law is "the one that said public networks like the telephone must be open to all comers at the same rate and could not discriminate. Even though the old AT&T ran a private network, the company had to complete everyone's calls; blocking critics from using the network was illegal."

If the FCC said broadband providers were common carriers, it would be easier to dictate the terms under which they must pass traffic from content providers to home Internet users. Because the FCC didn't go the common carriage route but still enacted anti-blocking and anti-discrimination rules, the commission had to do some legal gymnastics to justify the Open Internet Order.

In the court case, the FCC said its rules aren't common carrier regulations because "Verizon is free to offer or decline to sell broadband Internet access service to any end user. Verizon need not hold itself out to offer service indifferently to anyone. The only things that Verizon (and other broadband Internet access providers) cannot do are blocking its end users from reaching lawful content and charging edge providers to allow end users to reach them."

“The regulations cannot stand”

Both supporters and opponents of net neutrality laws suspected the appeals court's three-judge panel would find fault with this reasoning, and it did.

"[W]e must determine whether the requirements imposed by the Open Internet Order subject broadband providers to common carrier treatment," judges wrote. "If they do, then given the manner in which the Commission has chosen to classify broadband providers, the regulations cannot stand."

Further Reading

Judges cast a suspicious eye at FCC's justification of Open Internet Order.

While broadband providers may not be common carriers with respect to their Internet customers (that's you on the couch, surfing the Web), ISPs could be considered common carriers with respect to edge providers, the companies offering video or any other type of service over the ISP's network. By imposing anti-blocking and anti-discrimination requirements, the FCC treated ISPs as common carriers with respect to those edge providers, the appeals court ruled.

"We have little hesitation in concluding that the anti-discrimination obligation imposed on fixed broadband providers has 'relegated [those providers], pro tanto, to common carrier status,'" the court wrote. "In requiring broadband providers to serve all edge providers without 'unreasonable discrimination,' this rule by its very terms compels those providers to hold themselves out 'to serve the public indiscriminately.' Having relied almost entirely on the flawed argument that broadband providers are not carriers with respect to edge providers, the Commission offers little response on this point."

The ruling spans 81 pages, covering various arguments made by both Verizon and the FCC, but it really came down to the common carriage question. For example, the court said there was no need to even consider Verizon's claim that the Open Internet Order violated its First Amendment rights, because the FCC's failure on the common carriage argument rendered that point moot.

The FCC has room to resurrect net neutrality

The court didn't strike down all of the Open Internet Order. It left intact the order's rules requiring ISPs to disclose information about their network management practices.

The appeals court remanded the case back to the FCC "for further proceedings consistent with this opinion." The court did not dispute the FCC's authority to declare ISPs common carriers. Consumer advocacy group Public Knowledge urged the FCC to take today's ruling as an opportunity to classify broadband as a common carriage service or "craft open internet protection[s] that are not full fledged common carrier rules."

Public Knowledge Senior VP Harold Feld acknowledged to Ars that "such a reclassification would be subject to court challenge. But the Court here was pretty clear that it is up to the FCC to make a choice on classification."

Would the FCC do that? Julius Genachowski, the FCC chairman at the time the Open Internet Order was enacted, didn't feel comfortable doing so, perhaps due to pressure from members of Congress. Newly sworn-in Chairman Tom Wheeler has already gone on record as saying ISPs should be able to charge edge providers, one of the very things the commission's Open Internet Order was seeking to prevent.

"I am a firm believer in the market," Wheeler said, as we noted in coverage last month. “I think we’re also going to see a two-sided market where Netflix might say, ‘well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve. We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."

Wheeler today noted that the ruling does affirm that the FCC is allowed "to enact measures encouraging the deployment of broadband infrastructure’ and therefore may ‘promulgate rules governing broadband providers’ treatment of Internet traffic.’" He said the FCC will consider "all available options, including those for appeal, to ensure that these networks on which the Internet depends continue to provide a free and open platform for innovation and expression and operate in the interest of all Americans.”

Although the ruling invalidated the FCC's anti-blocking and anti-discrimination rules, the court did agree with the commission's opinion that without such rules, "broadband providers may be motivated to discriminate against and among edge providers. The Commission observed that broadband providers—often the same entities that furnish end users with telephone and television services—'have incentives to interfere with the operation of third-party Internet-based services that compete with the providers’ revenue-generating telephone and/or pay-television services.'"

Nothing in the court record "gives us any reason" to doubt that determination, judges wrote. "As the Commission noted, Voice-over-Internet-Protocol (VoIP) services such as Vonage increasingly serve as substitutes for traditional telephone services, and broadband providers like AT&T and Time Warner have acknowledged that online video aggregators such as Netflix and Hulu compete directly with their own 'core video subscription service.' … Broadband providers also have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users. Indeed, at oral argument Verizon’s counsel announced that 'but for [the Open Internet Order] rules we would be exploring those commercial arrangements.'"

Verizon is ecstatic

Today, Verizon hailed the court's decision, saying it "found that the FCC could not impose last century’s common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative services to their customers."

“One thing is for sure," Verizon continued. "Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet. Verizon has been and remains committed to the open Internet which provides consumers with competitive choices and unblocked access to lawful websites and content when, where, and how they want. This will not change in light of the court’s decision."

Comcast also weighed in, saying that even though it "consistently supported the Commission's Open Internet Order," it believes the FCC can write balanced rules "while avoiding inappropriate common carrier regulation."

Regardless of today's ruling, Comcast is bound by the Open Internet Order's rules for now because of an agreement related to its purchase of NBCUniversal.

"[W]e agreed in the NBCUniversal Transaction Order to abide by the Open Internet rules for seven years even if the rules were modified by the courts," Comcast said. "We remain comfortable with that commitment because we have not—and will not—block our customers’ ability to access lawful Internet content, applications, or services. Comcast’s customers want an open and vibrant Internet, and we are absolutely committed to deliver that experience."

National Cable & Telecommunications Association CEO Michael Powell said, "The cable industry has always made it clear that it does not—and will not—block our customers' ability to access lawful Internet content, applications, or services." Powell did not say whether its members intend to charge edge providers for preferential access. The NCTA said in a blog post that pay-for-play arrangements, which it called "paid service enhancements," will be "beneficial in supporting and sustaining the growth of next-generation networks."

Promoted Comments

"Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet."

Come on guys, they're just trying to give us more choices!

I know plenty of people who have been saying "I'd love to pay marginally less money to downgrade to a more restricted and limited internet plan".

That's really the central issue. There's nothing they can do by violating the Open Internet Order that is good for consumers. If they restrict access to content providers like Netflix, we end up with worse Internet access. If they charge Netflix for access and it has to pay, our Netflix subscription costs go up to fund Verizon a second time for the same access we've already paid for. If they start tiering off parts of the internet like cable services do with channels, we lose access to the open Internet.

There is no conceivable benefit that can occur for customers. It's either a reduction in service from what you have now, or a price increase, or both. None of those situations are good for us.

88 Reader Comments

Oh c'mon. Verizon et al. paid good money for those lobbyists. It'd be cruel not to give them carte blanche to set their own rules and basically print money. The customers win, if by customers we mean CEOs and stockholders.

Bottom line: all internet users lost, all companies hoping to build new markets or evolve existing ones lost, humanity's pursuit of knowledge lost. All in the name of some fat checks being cashed in by the big telcos.

"Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet."

Come on guys, they're just trying to give us more choices!

I know plenty of people who have been saying "I'd love to pay marginally less money to downgrade to a more restricted and limited internet plan".

"The D.C. Circuit's decision is alarming for all Internet users," Harvey Anderson, senior vice president of business and legal affairs for Mozilla, said in a statement. "Thanks to a legal technicality, essential protections for user choice and online innovation are gone. Giving Internet service providers the legal ability to block any service they choose from reaching end users will undermine a once free and unbiased Internet. In order to promote openness, innovation, and opportunity on the Internet, Mozilla strongly encourages the FCC and Congress to act in all haste to correct this error."

Harold Feld, senior vice president for the advocacy group Public Knowledge agreed..."We're disappointed in today's decision," he said in a statement. "The court has taken away important FCC flexibility, and its opinion could complicate FCC efforts to transition the phone network to IP technology, promote broadband build-out, and other matters.

Wonderful. So what happens to the rest of the world if the telcos' plan to charge companies like Netflix -or Ars - which are based in the United States comes to pass? Will telcos like ATT charge for access to not only American subscribers but passage through their networks to the next peer outside of the US? Will companies need to establish datacenters (not just content distribution nodes) outside of the US to provide unrestricted access to other countries? Seems like there could potentially be more fallout from this than just slower speeds for US users.

"I am a firm believer in the market," Wheeler said, as we noted in coverage last month. “I think we’re also going to see a two-sided market where Netflix might say, ‘well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve. We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."

Regulation does not end competition, it molds what the focus of that competition is about. In the current marketplace the competition is about who can charge the most hidden fees to its users. With common carrier law the competition would be about who can provide the best service per dollar. In a marketplace where the service is simple (providing fast internet), allowing "creativity" can only disadvantage the consumer.

Given the current state of the law, and the FCC's decision to not classify broadband ISPs as common carriers, the court made the right decision.

Downvote me if you don't like the decision, but I think it was the right one. But the Court left the door open for the FCC to reclassify broadband Internet access as a Title II common carrier service, and to re-regulate it.

Today, Verizon hailed the court's decision, saying it "found that the FCC could not impose last century’s common carriage requirements on the Internet, and struck down rules that limited the ability of broadband providers to offer new and innovative ways to charge their customers."

"Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet."

Come on guys, they're just trying to give us more choices!

I know plenty of people who have been saying "I'd love to pay marginally less money to downgrade to a more restricted and limited internet plan".

Why pay less when you can pay more? Verizon has been itching to double dip on delivered content for years now, and this looks like the Supreme Court saying "go ahead, knock yourself out".

"Today’s decision will not change consumers’ ability to access and use the Internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the Internet."

Come on guys, they're just trying to give us more choices!

I know plenty of people who have been saying "I'd love to pay marginally less money to downgrade to a more restricted and limited internet plan".

That's really the central issue. There's nothing they can do by violating the Open Internet Order that is good for consumers. If they restrict access to content providers like Netflix, we end up with worse Internet access. If they charge Netflix for access and it has to pay, our Netflix subscription costs go up to fund Verizon a second time for the same access we've already paid for. If they start tiering off parts of the internet like cable services do with channels, we lose access to the open Internet.

There is no conceivable benefit that can occur for customers. It's either a reduction in service from what you have now, or a price increase, or both. None of those situations are good for us.

I think(though I am no lawyer) that it should be possible for the FCC to request a re-hearing of the case from the Appellate Court sitting en banc, with all its members together on the bench. With the 3 recent confirmations, 7 of the appointments to the court were made by Democratic presidents and only 4 by Republican presidents. I should hope taht this would be the first course of action.

"I am a firm believer in the market," Wheeler said, as we noted in coverage last month. “I think we’re also going to see a two-sided market where Netflix might say, ‘well, I’ll pay in order to make sure that you might receive, my subscriber receives, the best possible transmission of this movie.’ I think we want to let those kinds of things evolve. We want to observe what happens from that, and we want to make decisions accordingly, but I go back to the fact that the marketplace is where these decisions ought to be made, and the functionality of a competitive marketplace dictates the degree of regulation."

Unless ISPs collude to have the same fee setup (like cellphone plans), it wouldn't be much of a choice. We're all screwed.

Regulation does not end competition, it molds what the focus of that competition is about. In the current marketplace the competition is about who can charge the most hidden fees to its users. With common carrier law the competition would be about who can provide the best service per dollar. In a marketplace where the service is simple (providing fast internet), allowing "creativity" can only disadvantage the consumer.

Actually, in this case, with the local monopoly rules in place, it has nothing to do with who provides the best service per dollar, but who can get the best deal from the other companies...

Because when your only choices are between Cable and maybe DSL or some form of wireless provider, there's no way to switch to a "better" service...because there isn't one available.

Until cable companies lose their local monopolies, the term "broadband marketplace" in the US is a joke....

So is there a reason why the federal government don't just establish a nation-wide public fiber network and let the ISP compete on service instead of being pipes?

If the federal government has enumerated power "to establish Post Offices and post Roads", then why isn't the ability to establish a internet network just a natural extension of that?

Because the companies that currently own the existing network drive dump trucks full of money to legislators to not do that? What do ya want? They're not made of stone. They GOTTA take that money. You know...for the good of their constituent (notice the conspicuous lack of plural).

It's surprising that Verizon, Comcast and the National Cable Organization are all so committed to keeping everything exactly how it is under this regulation while also needing to get rid of this regulation so that they can innovate and provide new services.

It's surprising that Verizon, Comcast and the National Cable Organization are all so committed to keeping everything exactly how it is under this regulation while also needing to get rid of this regulation so that they can innovate and provide new services.

Verizon Wireless used to say the same thing about unlimited data. Now they have data caps. Hell, everybody has data caps! Technically speaking, data caps doesn't serve any purpose other than being able to charge more money from their customers. Bandwidth cap, I understand, but data? Come on..

I think(though I am no lawyer) that it should be possible for the FCC to request a re-hearing of the case from the Appellate Court sitting en banc, with all its members together on the bench. With the 3 recent confirmations, 7 of the appointments to the court were made by Democratic presidents and only 4 by Republican presidents. I should hope taht this would be the first course of action.

I think that is correct.

OTOH, the Court ruled that a regulatory agency could not make rules in violation of the authorizing statute. We should all be praising that decision.

Instead, everyone is wringing their hands. Why?

Just because people happened to LIKE the illegal rules is no reason to support an agency making a rule where it had no legal authority to do so. That is the very definition of an out of control regulatory agency. Next time, the agency might create an illegal rule that you DON'T like.

Had the FCC ruled ISPs to be common carriers, THEN it could have legally created and applied common carrier rules to those ISPs. But the FCC ruled ISPs were not common carriers. Having done so, the FCC couldn't then apply common carrier rules to them, when the law clearly prohibits that.

So basically, the FCC did something illegal, and we're all sad that the court told them they couldn't do that.

The job of the FCC is not to promote virtue. The confusion of the author of this article about the role of virtue in our society is common to those obsessed with some semi religious ideological vision. The success of our economy has largely been achieved by the choice of effectiveness as the primary criteria for economic behavior. The great step forward for human civilization has largely been marginalizing all of the varied obsessions with virtue to the practice of private religious beliefs. The idea that the internet is some kind of religious happening is delusional at best.

You are correct that the job of the government is not to promote virtue. However, the job of the government is to protect the greater good of its citizens.

This ruling could allow for exclusive deals with content providers. For example, to get Netflix you have to subscribe to Verizon, to get Amazon Prime you need Comcast etc.

Allowing for a fragmented internet does not benefit the general population.

new fees for content providers in the wireless market, which wasn't subject to all the provisions of the Open Internet Order. We can expect such arrangements to happen in the wired broadband market unless something changes.

"I'm not a content provider when I'm communicating" . That is the problem .

I fail to see how charging Netflix for a superior connection is any different then what Netflix has been trying to do already by asking ISP's to install caching servers directly to their networks.

Here's the difference:

Scenario 1 (today's scenario): Netflix spends $10k on the box, gives it to the ISP. Scenario 2 (Verizon's solution): Netflix (and every other major service provider) pays Verizon $1M per month to not have their content throttled down to 50kbps shared among all of their customers.

Regulation does not end competition, it molds what the focus of that competition is about. In the current marketplace the competition is about who can charge the most hidden fees to its users. With common carrier law the competition would be about who can provide the best service per dollar. In a marketplace where the service is simple (providing fast internet), allowing "creativity" can only disadvantage the consumer.

Actually, in this case, with the local monopoly rules in place, it has nothing to do with who provides the best service per dollar, but who can get the best deal from the other companies...

Because when your only choices are between Cable and maybe DSL or some form of wireless provider, there's no way to switch to a "better" service...because there isn't one available.

Until cable companies lose their local monopolies, the term "broadband marketplace" in the US is a joke....

Exclusive franchise agreements are not even the biggest part of the problem. Even in places where there aren't any, the cost of laying an entirely new network is a massive barrier to entry and the maximum number of competitors is still capped because no municipality is going to allow running multiple lines to houses for the same purpose past a certain point.

Infrastructure is a natural monopoly, so it is almost impossible for there be free market competition involving it. The physical lines have to be taken out of the equation if there is ever going to be competition in service.

ISP's are common carriers. End of story. Trying to write rules to make them de facto common carriers obviously didn't work. So now it's time to be explicit about it. It's the modern iteration of the traditional POTS phone network. It should be regulated as such.